Lexmark stocks rise
May 4th, 2010 Posted in General, Industry NewsPrinter maker Lexmark International Inc said first-quarter profit jumped 61 percent, beating estimates, as cost cuts and strong sales of supplies and services boosted margins.
Lexmark’s results and rosy outlook mirror optimistic reports from rivals Xerox Corp and Canon, and may signal an improving economy, analysts say.
Its shares rose 2.6 percent after it said net income rose to $95.3 million, or $1.20 a share. That compares with $59.2 million, or 75 cents a share, in the year-earlier quarter.
Profit excluding items was $1.35, beating analysts’ average forecast of 89 cents, according to Thomson Reuters I/B/E/S.
Revenue rose 10 percent from a year earlier to $1.04 billion, exceeding the average analyst estimate for $961.1 million.
Sales in its printing solutions and services division rose 20 percent in the quarter. Hardware revenue grew 18 percent, including a 27 percent increase in revenue from laser printers.
Imaging companies rely on sales of inkjet, laser and commercial printers to lock in customers who will need ink toner paper and related services for years to come.
“With services, the proposition is helping people lower their costs, so that business was good through 2009,” Lexmark chief executive Paul Curlander told Reuters. “In the first quarter we had strong double digit growth in our services business, but we are also starting to see the hardware purchases starting to come back, which we didn’t see in 2009.”
After the results were released, Moody’s lifted its ratings outlook to “stable” from “negative,” citing Lexmark’s 9 percent improvement in sales of supplies, its first quarter of growth in that area since 2008.
“Lexmark is building a higher quality installed base, meaning customers who print more frequently and thus consume more of Lexmark’s highly profitable supplies,” said Moody’s Senior Vice President Richard Lane in a statement.
Gross margins at Lexmark, which also competes with Hewlett-Packard Co ,Canon Inc and Samsung Electronics Co Ltd, rose to 36.9 percent versus 35.3 percent in 2009.
For the second quarter, the company expects earnings per share excluding items of 85 cents to 95 cents, eclipsing analyst view of 73 cents a share. The company expects revenue to increase in the mid- to high-single digit percentage range.
“We project sales ahead to be supported by a printer industry rebound that we expect will last through 2011 (and. cost controls should aid margins,” said Standard & Poor’s Equity Research analyst Tom Smith, who raised his rating on Lexmark to “buy” from “hold.”
Lexmark shares rose 2.6 percent, at $40.99 in morning trading in on the New York Stock Exchange.
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